National Insurance Contributions Increase

Rachel Reeves Excerpts

Tuesday 8th March 2022 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

I beg to move,

That this House calls on the Government to cancel its planned 1.25 percentage point rise in National Insurance Contributions that will cost families an average of £500 per year from April 2022.

Six months ago today in this Chamber, I set out Labour’s opposition to the Conservatives’ national insurance tax hike. It was clear to us then that this was going to be a heavy burden on working people and businesses who could ill afford it. Since that time, the situation has worsened, but the Conservative party has not altered its wrong course. Filling up the car with petrol is more expensive, energy bills are soaring, and the cost of the weekly food shop is rising. It all adds up. Inflation is now 5.5%, the highest level since 1992, and is forecast to reach a massive 8% next month, outpacing people’s pay rises—if they get one at all. Growth is expected to slow further. The stark reality is that over the past 12 years, the Tories have become the party of high taxes because they are now the party of low growth.

This morning’s report by the Resolution Foundation finds that the average household will experience a £1,000 hit from tax rises and energy price increases this year under the Conservative Government. The Treasury Committee rightly highlighted the Office for Budget Responsibility’s forecast, which stated that

“the policy mix chosen by the Chancellor”

at the last Budget

“will act as a boost to inflation”.

Just focus on that for a moment: the Chancellor’s own policy choices are boosting inflation. The Government should have acted when the cost of living crisis started growing last September and well before it spiralled out of control in December, with costs soaring and inflation heating up.

The Russian invasion of Ukraine is devastating lives and livelihoods, and we must do all we can to stop Putin’s aggression. What is happening in Ukraine will have a cost of living effect here at home, too. When the facts change, so should the Government’s policies; people cannot afford Ministers carrying on regardless of worsening circumstances. The Chancellor must show some understanding of the real-world consequences of his policies for working people and businesses.

The spring Budget will take place two weeks tomorrow, on 23 March. If the Government cannot commit to halting the national insurance rise today, they must do so then, two weeks before it comes in on 6 April and hits working people and employers hard. Today is an opportunity for the Conservatives to show that they get it, and do not want to make the cost of living crisis even worse than it already is.

[Tim Farron (Westmorland and Lonsdale) (LD)]

The hon. Lady is making an important speech. She is right that the national insurance rise will cripple families who are already struggling to get by, but does she agree that what makes it worse is that not a penny of the money raised will go into the hands of hard-working carers who desperately need it? In a community such as mine that is above the national average age, with a need for more carers, that means people without care or with inadequate care.

[Rachel Reeves]

The hon. Gentleman is absolutely right. That is the great deceit at the heart of this national insurance tax rise. I will address some of those details in a moment.

[Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)]

I fully support what the hon. Lady is saying. Does she agree that some of the measures we have seen for dealing with the cost of living crisis—for instance, the energy rebate—might now make matters worse? That rebate works on the basis that it will be repaid over subsequent years, and will only really work if energy prices normalise or fall, but all projections now indicate that energy prices will rise and rise, so the Government’s interventions are going to be inflationary and add to the problems people are facing.

[Rachel Reeves]

I fully agree with the hon. Gentleman. A buy now, pay later scheme for energy prices, based on the premise that prices are going to fall, does not bear any relation to the facts. That is why I say, when the facts change, so should the Government’s policies. They should not just carry on steering the boat in the wrong direction, towards the storm.

It is fair to say that the Prime Minister’s word has recently been deeply discredited, but let me remind the Chamber what he previously said about tax:

“Read my lips: we will not be raising taxes on income, or VAT, or national insurance.”

This is not just another of the long list of broken vows from a leader who has a fleeting relationship with truth and accuracy. This manifesto breach now belongs to the entire Conservative Government and especially the Chancellor, who seems not to want to take responsibility for his own tax rises. Let us not forget that last March, a year into the pandemic, the Chancellor said,

“We’re not going to raise the rates of income tax, national insurance, or VAT.”

This is not just the wrong thing to do; it is a broken promise. It is a clear and flagrant breach of the Conservative party’s own manifesto. They promised the public that they would not do this, and now they are going back on their word.

The Chancellor is not here to defend his new tax on jobs—I do not know why—but it is becoming increasingly clear that rather than help people now when they really need it, the Chancellor is telling his colleagues and briefing newspapers that he will make people wait until an election, when he wants to make a new set of promises to win people’s votes. People need help now and the Government should act now, not play games with people’s living standards. Voters are smarter and savvier than the Chancellor assumes. They have already seen through his buy now, pay later loan scheme, meant to help with energy bills. It is not too late for the Government to look again at Labour’s proposal for a one-off windfall tax on oil and gas producers in order to cut household energy bills by up to £600 this year. The case for our proposal gets stronger by the day, and the Chancellor should adopt it, but instead of easing the cost of living crisis, the Conservatives are the cost of living crisis.

[Christine Jardine (Edinburgh West) (LD)]

The hon. Lady is making a very powerful speech and some excellent points with which I agree. Does she agree that the Government are gambling with taxpayers’ money, rather than investing it? They are gambling that the price will go down, when we all know it will go up, and they are not looking to those people who have made a massive profit over the past two years, both from the energy crisis and in the pandemic, to try to relieve the burden on those who have been hardest hit.

[Rachel Reeves]

Politics is about choices; the hon. Lady makes an important point. This Government are making the choice to increase taxes on ordinary working people and those who employ them, while on the Opposition Benches, we say that those who have benefited from the high energy prices should pay a bit more in tax to relieve the pressure on ordinary working people. We have a Conservative Minister who goes on the TV and radio and says that energy companies and the North sea oil and gas companies are struggling right now. Tell that to my constituents, the hon. Lady’s constituents and all our constituents who are struggling to pay the bills, while the profits keep coming in for the big oil and gas producers.

[Sir Oliver Heald (North East Hertfordshire) (Con)]

Does the hon. Lady not agree that what she is saying is all smoke and mirrors? If a tax is put in for one year, that will not pay for the continuing costs over future years. What she is doing is simply misleading the public.

[Rachel Reeves]

If we raised those taxes now on North sea oil and gas companies, we could bring in money that could be used to relieve pressure now. I think that the right hon. and learned Gentleman’s constituents in North East Hertfordshire would be pretty pleased to have money off their bills this year, rather than the buy now, pay later scheme that we get from this Chancellor.

Why is the Chancellor not listening? The Conservatives’ rise in national insurance will hit almost 30 million working people. The TUC rightly argues that it is wrong to hit young and low-paid workers while “leaving the wealthy untouched”. The British Chambers of Commerce describes the Government’s policy as

“a drag anchor on jobs growth”.

The CBI put it bluntly and said that it will

“hurt a business’s ability to hire staff”.

On Sunday, the Federation of Small Businesses warned:

“Slamming small firms with a jobs tax hike will put the brakes on investment, upskilling and growth within communities most affected by the pandemic.”

The Chancellor must know what business organisations and trade unions are saying. We can only conclude that he is consciously disregarding their experience and views. We know from research by the National Institute of Economic and Social Research that job-intensive sectors will be disproportionately hit hard. The Conservatives have deliberately designed a tax hike that will hit people working in hotels, restaurants, transport, retail and wholesale especially hard.

[Dr Caroline Johnson (Sleaford and North Hykeham) (Con)]

rose—

[Jim Shannon (Strangford) (DUP)]

rose—

[Rachel Reeves]

I will give way to the hon. Lady, and then to the hon. Gentleman.

[Dr Johnson]

I wonder if the hon. Lady can help me, because I am slightly confused. She has talked about a windfall tax on the energy companies, but she is then conflating that with the NI rise. The NI rise is not to pay for energy bills, as I understand it, but to pay for health and social care. Last week, she wanted to use that windfall tax to spend on reducing energy prices, as she has said today. She cannot use one tax to do two things. What will she use the tax for, were she to bring it in? In particular, if she were to cancel the NI rise—I do not want to increase taxes; I am a Conservative, so of course I do not want to do that—how would she pay for the care and healthcare of those vulnerable constituents who we know need it so badly?

[Rachel Reeves]

The average household in the hon. Lady’s constituency will be £1,200 worse off because of the tax increases and the price rises happening as a result of her Government’s policies. As she well knows, we would use the windfall tax to relieve pressure on household gas and electricity bills. The hon. Lady might oppose that, but I suggest she puts that on her leaflets and puts that to the voters in her constituency at the next election.

[Several hon. Members rose—]

[Rachel Reeves]

Sorry, I said I would give way to the hon. Member for Strangford (Jim Shannon). I will do that and then I will make a little more progress.

[Jim Shannon]

I thank the hon. Lady for putting forward her point of view. My party and I supported her party on a previous Opposition day in relation to a tax on oil and gas. Today the hon. Lady is, on behalf of the Opposition, putting forward something that is equally important. In my constituency of Strangford, fuel prices are up 50% and grocery prices are up between 25% and 30%. Does she agree that while for some the national insurance contributions increase will be a weightless straw, it could well be the straw that breaks the camel’s back?

[Rachel Reeves]

The hon. Gentleman speaks powerfully on behalf of his constituents, who are struggling with the double whammy of prices increasing, particularly gas and electricity bills, at the same time as this Government are piling on pressure after pressure with higher taxes on the same people who are paying those higher bills. He is absolutely right that people can only take so much, and the national insurance contribution tax hike is, as he says, potentially the straw that breaks the camel’s back.

Politics is about priorities, and it is about choices. So who has the Chancellor chosen to protect—not to tax more? Those who earn huge incomes from a large portfolio of buy-to-let properties or those making large sums from selling stocks and shares will not pay a penny more tax on that income. The super-rich will not be paying more. Roman Abramovich and billionaire oligarchs are not being made to pay more tax. In fact, some of those trying to relinquish their assets now appear to be using offshore vehicles to avoid paying tax. Lubov Chernukhin, wife of Putin’s former finance Minister, and mega-donor to the Tory party, has reportedly lobbied Ministers against higher taxes for the wealthy. As luck would have it, she will not be paying any more tax, unlike people across Britain who work for a living and keep our economy going.

[Mr Clive Betts (Sheffield South East) (Lab)]

My hon. Friend has mentioned not taxing buy-to-let landlords who have a number of properties. I do not think she is aware that the permanent secretary for the Department for Levelling Up, Housing and Communities came to the Select Committee yesterday and confirmed that, where properties are let with council tax and rents being paid in the same bill, the council tax rebate of £150 will go not to the tenant, but the landlord. If the landlord owns multiple properties, as long as they are not owned by a corporate entity, they will get multiple amounts of £150. Some of the landlords are going to be extremely well off, and tenants will have to go and apply to the discretionary fund to get any help at all.

[Rachel Reeves]

I thank my hon. Friend for bringing that to the House’s attention. It is exactly why Labour said that the warm home discount should be expanded to ensure that the money goes to the people who need it, not the landlords.

At the same time as the Government are asking hard-working British people to pay more in tax, they are writing off billions of pounds in fraud. Ordinary people are paying for this Government’s waste. The Chancellor repeatedly ignored warnings about the holes in his covid business support schemes, resulting in £4.3 billion of public money being written off. That does not even include the amounts lost to bounce back loan fraud, including taxpayer cash handed out to drug dealers and organised criminals. That fraud currently stands at £4.7 billion, so that is £9 billion and counting handed to fraudsters. Then there is the colossal Government waste during the pandemic, with £8.7 billion lost on unusable personal protective equipment, all paid for by the taxpayer. Billions has been spent on crony contracts that have not delivered, and every single cheque has been signed by the Chancellor.

[Richard Graham (Gloucester) (Con)]

rose—

[Rachel Reeves]

Let me just finish this point. Yesterday, we saw a whole new meaning to burning through money. After wasting billions on unusable PPE, the Government are literally burning it to get rid of it—putting taxpayers’ money through the furnace. The Conservatives’ promise to get value for money for taxpayers has gone up in flames. Taxpayers do not want to keep picking up the price of these dodgy contracts, fraud and waste. I will be very interested to hear the hon. Gentleman’s views on that.

[Richard Graham]

I am grateful to the hon. Lady. The difficulty is that this is a debate about the national insurance contributions increase; it is not a debate about her wide range of thoughts on all sorts of other aspects of the economy. The problem with this particular debate is that this additional tax, which is hypothecated exclusively for health and care, will make a huge difference to millions of people across the country, including in Leeds, who have been waiting for elective surgery, want to see social care resolved and need the extra funds for it to happen. In addition, it is progressive, because the top 14% of taxpayers will pay half of the revenue raised. Surely she would approve of that.

[Rachel Reeves]

The hon. Gentleman knows that the average household in Gloucester will be £1,299 worse off because of the double whammy of tax increases and price increases. I think they would be pretty concerned about the amount of taxpayers’ money that is being written off in fraud and waste—money that is being burned by the Government.

Despite waste and fraud costing more than this year’s national insurance contribution rise will raise, the Prime Minister says that the tax rise is necessary. That is the great deceit. On the steps of Downing Street in 2019, he claimed to have a plan for social care. Yet almost three years on, we know that the Government’s approach to social care will not stop people selling their home to pay for care, it will not deliver a penny more to improve care today, and it will not add a single minute of care and support for those who need it. Even then, NHS waiting lists are set to rise even further for the next two years. The Government will not fix the problems with our social care sector or our NHS. Never before have taxpayers been asked to pay so much and got so little in return.

It is time for the Chancellor to urgently change direction. The national insurance tax rise was wrong in September and it is even worse in March. It is the wrong tax at the wrong time: the cost of living is higher, inflation is out of control, wages are not keeping up, energy bills are going through the roof and family finances are stretched, yet the Chancellor refuses to back our windfall tax plans to help.

The Chancellor has not turned up today, but my message to the Minister is that he must turn up to the spring Budget with a plan to make a difference to the cost of living. The Chancellor’s tax rise should not go ahead. MPs can send the strongest signal today by backing our calls to cancel the national insurance tax increase next month. They know full well that our country believes that it is time to change course.

The Conservative Government are not doing enough to cushion the blows. In fact, when it comes to the tax rise, they are piling on the pressure and making matters worse. They must think again and back Labour’s motion today.